IT Empires Prepare to Strike Back -- Corporate Outlook

   By Shira Ovide 
 

Big information-technology sellers like Microsoft Corp., Cisco Systems Inc. and Hewlett-Packard Co. were caught flat-footed as new business-technology trends started to gain traction, such as software sold by subscription and data-analysis tools. Now, the behemoths are waking up and trying to claw their way back to technology relevance.

In short, the IT Empires strike back.

The tech giants may never regain their lock on corporate technology. But in 2015, expect them to play offense by embracing young technologies designed to crush them, swapping out longtime corporate leaders, forming unlikely alliances, or ditching moneymaking businesses to reinvest in areas that show more potential for growth.

"We can either lie down on the tracks or get on the train," said Crawford Del Prete, chief research officer of technology-strategy firm IDC, summarizing the big vendors' attitude.

Once unusual events became commonplace in 2014. International Business Machines Corp. sold its profitable but low-margin computer-server business and joined hands with consumer powerhouse Apple Inc. in business-mobile apps. H-P, Cisco and Dell Inc. agreed to sell generic computing equipment controlled by rival firms' software, undercutting their own pricey hardware. Microsoft pitched its cash-cow Office software on the iPad.

The fuddy-duddies are bound to pull out more surprises in 2015.

IDC predicts Microsoft or IBM will team up with Facebook Inc. this year to jointly develop software services for corporations. Microsoft watchers wonder whether the company will make a landmark business shift by offering Windows as an annual subscription for the first time. The biggest IT vendors will continue scooping up startups to stay in the game, executives predict.

Wild cards for 2015: Will aging companies put out to pasture their longtime CEOs, such as Cisco Chief John Chambers and EMC's Joe Tucci? Will big hardware firms weigh a merger, as EMC and H-P did for a time in 2014?

What's clear is the Empires can't sit still. IDC says the big IT vendors' bread-and-butter businesses are shrinking or stagnant, and predicts one-third of all corporate IT spending this year will be in emerging areas like mobile, data analysis, cloud computing and digital intelligence for making cars or factories increasingly automated. That is up from about 10% of IT spending a few years ago.

Write to Shira Ovide at [e-mail]

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